The risk relevance of International Financial Reporting Standards: Evidence from Greek banks |
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| Affiliation: | 1. Clinic of Medicine, Faculty of Veterinary Medicine, University of Thessaly, Trikalon Str 224, GR-43100 Karditsa, Greece;2. Laboratory of Pharmacology, School of Veterinary Medicine, Aristotle University of Thessaloniki, Greece;3. Companion Animal Clinic, School of Veterinary Medicine, Aristotle University of Thessaloniki, Greece;4. Department of Veterinary Public Health, National School of Public Health, 11513 Athens, Greece;1. University of Thessaly, School of Health Sciences, Department of Biochemistry & Biotechnology, Microbiology-Virology Laboratory, Larissa, Greece;2. University of Ioannina, Medical School, Department of Microbiology, Ioannina, Greece;1. DeGroote School of Business, McMaster University, Hamilton, Ontario L8S 4M4, Canada;2. Schulich School of Business, York University, Toronto, Ontario M3J 1P3, Canada;3. C.T. Bauer College of Business, University of Houston, 334 Melcher Hall, Houston, TX 77204-6021, United States;4. Lazaridis School of Business & Economics, Wilfrid Laurier University, Waterloo, Ontario, N2L 3C5, Canada |
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| Abstract: | The main purpose of the paper is to estimate market, interest rate and exchange rate risk of Greek financial institutions and to explore the relationship between market-based measures of risk and accounting variables before and after the adoption of International Financial Reporting Standards (IFRS) in order to examine whether IFRS introduction enhances the information content of accounting data. Empirical results reveal that all banks are exposed to market risk while interest rate and exchange rate risk affect them occasionally. Moreover, the IFRS introduction reinforces the explanatory ability of accounting data, on systematic and non-systematic risks. Concerning the risk-relevance of accounting ratios, liquidity measures, credibility, earnings per share and provisions for credit loss are inversely related to systematic and non-systematic risks under IFRS. Moreover, loans to total assets ratio, interest rate spread and income diversification are directly associated with market measures of risk, while bank size is negatively related to both risk measures under IFRS. Our findings imply that the fair value orientation of IFRS is responsible for the higher risk-relevance of fundamentals as opposed to the historically oriented Greek Accounting Standards (GAS). |
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